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Category > Business & Finance Posted 03 Jun 2017 My Price 7.00

The Perpetual Growth Model

The Perpetual Growth Model Suppose dividends for Tony’s Pizza Company are projected to grow at 6 percent forever. If the discount rate is 16 percent and the current dividend is $2, what is the value of the stock?

The Two-Stage Growth Model Suppose the Titanic Ice Cube Co.’s dividend grows at a 20 percent rate for the next three years. Thereafter, it grows at a 12 percent rate. What value would we place on Titanic assuming a 15 percent discount rate? Titanic’s most recent dividend was $3.

Residual Income Model Suppose Al’s Infrared Sandwich Company has a current book value of $10.85 per share. The most recent earnings per share were $2.96 per share, and earnings are expected to grow at 6 percent forever. The appropriate discount rate is 8.2 percent. Assume the clean surplus relationship is true. Assuming the company maintains a constant retention ratio, what is the value of the company according to the residual income model if there are no dividends?

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Status NEW Posted 03 Jun 2017 11:06 AM My Price 7.00

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